(Bloomberg View) — At the end of its two-day policy meeting, the Federal Reserve on Wednesday delivered a rather milquetoast statement — purposely and understandably so. In the process, the central bank is achieving two goals: keeping its options open as it continue to navigate an unusually fluid economic, financial, institutional and political landscape; and reinforcing the markets' comfort with the notion that the Fed will be able to provide, to borrow a phrase from Ray Dalio, a "beautiful normalization" after a prolonged period of heavy reliance on unconventional monetary policy.
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As expected, the Fed left interest rates unchanged and stated that it would start reducing its balance sheets "relatively soon." It made the announcement in the context of continued solid job gains, a somewhat more dovish view of inflation, an unchanged outlook, and as it focused on what it sees as a "roughly balanced" balance of risk.
The immediate reaction of markets was supportive of this steady-as-it-goes approach. The VIX, the widely followed measure of stock market volatility known as the "fear index," dipped momentarily to a record low, while market yields eased somewhat, equities remained strong and the dollar weakened a little.
